Even though it is the least integrated with the global economy, Africa may be the worst hit region by the global economic crisis. Each of the four channels through which the crisis is affecting Africa has a particularly nefarious impact.
- Private capital flows, which in 2007 had surged to $53 billion—for the first time exceeding foreign aid to the continent—are declining. Since last year, African stock markets have fallen by an average of 40 percent, with some such as Nigeria's falling by over 60 percent. Ghana and Kenya have postponed sovereign bond offerings worth over $800 million, delaying the construction of toll-roads and gas pipelines. The Democratic Republic of Congo has lowered its expected foreign direct investment by $1.8 billion. These flows were financing much-needed infrastructure and commodity-based investments. More importantly, the surge in capital inflows had raised expectations that African economies had “turned the corner”—only to have those expectations deflated for reasons that are not remotely the fault of Africans.
- Remittances, which had peaked at about $20 billion a year in 2008, are expected to decline by 4.4 percent  this year. Typically, remittances are counter-cyclical: when your family is having difficulties, you send them more money. But this time the crisis is in the remittance-sending countries. Over 77 percent of Africa's remittances come from the U.S. and Western Europe.
- The third channel is foreign aid. Although donors increased aid to Africa in 2008, they are already $20 billion short of the commitments made in Gleneagles in 2005—commitments made when the global economy was more robust. Today, fiscal pressures to stimulate the donors' own economies are mounting. If we draw lessons from the 1990s financial crises in Norway, Sweden and Finland, foreign aid could fall substantially . A cutback in foreign aid could make the difference between life and death for, among others, the two million HIV-positive Africans on anti-retroviral therapies.
- Fourth, the rapid decline in commodity prices, although a benefit to Africa’s oil importers, is causing a major decline in exports and government revenues in the many commodity exporters. Even those oil exporters who saved their windfall oil revenues in 2008 (Angola, Gabon and Nigeria all used a reference price of oil of about $57 a barrel when the market price was $140) are suffering because their non-oil sector is both very small and highly dependent on government expenditures. Angola's GDP is expected to decline by 23 percent in nominal terms. Exporters of other commodities, such as Zambia, DRC and South Africa, are experiencing a substantial drop in export revenues and, in some cases, fiscal revenues as well.
In addition, several African countries entered the global financial crisis with significant macroeconomic imbalances. Ethiopia's inflation rate in July 2008 was 60 percent; Ghana's fiscal deficit was 14 percent of GDP. South Africa's current account deficit, which was financed largely from private capital flows, was 8 percent of GDP.
The net result is that Africa's GDP will grow at about 2.4 percent  in 2009, about two and a half percentage points slower than in 2008. While 2.4 percent growth is higher than the zero or negative growth being forecast for the United States or Europe, a two- to three-percentage-point drop in growth could have devastating consequences for a low-income region.
Until 2008, African countries had been experiencing—for the first time in two decades—sustained economic growth equal to that of all developing countries (outside China and India). Thanks to sound economic policies and rising commodity prices, Africa's growth had been accelerating from 5.7 percent in 2006 to 6.1 percent in 2007 and a projected 6.4 percent in 2008. Poverty was declining and many human-development indicators—notably the prevalence of HIV/AIDS—were improving. Now the hopes created by this decade-long surge in growth are being dashed. Political and social unrest may follow.
Furthermore, Africa's recent economic growth was due at least in part to the economic reforms that policymakers undertook during the previous decade. There is a good chance that political support for these reforms will wane. That most developed countries are undertaking what look like "reverse reforms"—bank nationalization, deficit-increasing public spending programs—will make it harder to sustain reform momentum in Africa.
Finally, the global economic crisis could lead to a human crisis in Africa. If Africa experiences a growth deceleration that is typical of the past, we estimate that an additional 700,000 infants  will die before their first birthday.
Question (asked by someone when I made a presentation along these lines at the World Bank): If all this is true, why was there so little additional aid for Africa in the G-20 communiqué ? I’d be interested to hear what you think.